A one-off bonanza for the six months to December from the country’s second-biggest LIC Argo Investments has come with a warning that the good times are unlikely to reoccur.
Argo lifted its interim dividend more than 14% – from 14 cents up to 16 cents per share fully franked – following a 91.5% increase in first-half profit.
(Bigger rival Australian Foundation Investment Co left its interim steady ahead of what could be a volatile second half.)
Argo warned the strong returns of 2020 and 2021 would not be repeated as stimulus measures wind down.
“The rebound in first half profit was driven by increased investment income, with most companies in Argo’s portfolio raising or returning to paying dividends as the economy recovered from the initial impacts of the COVID-19 pandemic,” the company told shareholders in the ASX announcement.
“In particular, a number of our larger holdings increased dividends by more than 100 per cent, including Macquarie Group, BHP Group, Rio Tinto and National Australia Bank.”
“It in the immediate term, we expect conditions to remain challenging as markets globally digest the effects of rising inflation and the realisation that interest rate rises are imminent,” it wrote.
“Looking further ahead, we remain confident in Australia’s underlying economic recovery, whilst cognisant that the share market’s strong returns recently have been supported by unprecedented stimulus and are not likely to be repeated.”
During the six months to 31 December, Argo bought $301 million worth of shares and received $191 million from disposals and takeovers.
It said it bought into EML Payments, Aurizon Holdings, Lendlease Group, CSL, and Macquarie Group. And sold down its stake in Washington H Soul Pattinson, while selling out of Boral, Crown Resorts, and AGL Energy.
“In addition, a number of new stocks were added to the portfolio over the half year, while other holdings were removed due to mergers or takeovers, including Oil Search, Spark Infrastructure and Milton Corporation. Overall, the total number of stocks in the portfolio remained the same,” Argo said.
Argo shares ended up 0.1% at $9.91. That’s well down on the yearly high of $10.39 reached in mid-January.